Newfield to buy assets of Stone Energy

Newfield Exploration Co., a U.S. oil and natural-gas producer, agreed to buy Stone Energy Corp.'s assets in the Rocky Mountains for $575 million to expand its presence in the region.

The assets, with proved reserves equivalent to 200 billion cubic feet of gas, produce about 40 million cubic feet of gas equivalent a day, the Houston-based company said in a statement Monday. Gas accounts for 70 percent of reserves.

The acquisition gives Newfield gas reserves in the Rocky Mountains, which the company entered in 2004 with the acquisition of the Monument Butte oil field in Utah.

Newfield will spend about $50 million this year and $90 million in 2008 to develop the new assets, spokesman Steve Campbell said.

"Strategically it's something they've wanted to do," said Carin Dehne Kiley, an analyst at Calyon Securities USA Inc. in New York who rates Newfield shares an "add" and doesn't own any. "It will help their reserve life."

The Stone Energy properties, which include assets in the Green River Basin, the Jonah field and Powder River Basin, have a reserve life index of almost 15 years, compared with about eight years for Newfield's current fields, Campbell said. The index is a measure of how long it would take to deplete reserves at the current production rate.

Shares of Newfield rose $2.07, or 4.7 percent, to $46.09 in New York Stock Exchange composite trading, the biggest one-day gain since Nov. 17. Stone Energy's shares jumped $2.11, or 6.4 percent, to $34.85, the biggest gain since May 25.

Newfield plans to finance the acquisition initially through its existing credit agreement and thereafter from asset sales, Chief Executive Officer David Trice said in the statement.

"We intend to market our assets in Bohai Bay, China, our properties in the U.K. North Sea and some smaller packages along the onshore Texas Gulf Coast and in the Mid-Continent, as well as some properties in the shallow water Gulf of Mexico," he said.

Stone Energy, based in Lafayette, La., and the target of a takeover battle between two suitors, said in December that it planned to sell assets, including in the Rocky Mountains, to cut debt after failing to complete a deal with either company.

Energy Partners Ltd. agreed in June to buy Stone Energy for $1.4 billion, wresting the company from another prospective buyer, Plains Exploration & Production Co. Energy Partners dropped the deal on Oct. 12 after becoming the target of an unsolicited takeover bid from Australia's Woodside Petroleum Ltd.

Stone became a takeover target after struggling to regain credibility in the wake of slashing its assessment of proved oil and gas reserves in 2005.